The U.S. Government’s Second Lawsuit Involves Billions of Dollars

After just two days, a second lawsuit was filed against the United States government by Pershing Square Capital Management LP. Under Activist Bill Ackman’s authority, the lawsuit was filed over the bailout of Freddie Mac and Fannie Mae, shown by the court documents. In complaint with the United States District Court, it is alleged by Pershing Square that tens of billions of dollars were seized in Freddie Mac and Fannie Mae profits.

Being the largest shareholder in Fannie Mae and Freddie Mac, Pershing Square has stated within their complaint that stockholders of Fannie Mae and Freddie Mac were told that they no longer have any fundamental shareholder rights. According to the complaint, the conservator of Fannie Mae and Freddie Mac, Federal Housing Finance Agency refused Pershing Square’s demands for records and books inspections from the board of directors of each organization. Pershing Square also states that the dividends paid by the mortgage companies must be shared with the other common shareholders. Pershing Square has also obtained three retirees that own Fannie Mae stock, as plaintiffs of the lawsuit.

In Pershing Square’s previous complaint that was filed with the United States Court of Federal Claims of Washington D.C., the government was accused of violating the Fifth Amendment of the United States Constitution for taking private property without just compensation for public use. Although each lawsuit involves separate legal theories and are placed within different courts, their goal is to help Ackman recoup his losses from the declined value of his Freddie Mac and Fannie Mae shares.

Last November, Pershing Square disclosed that they invested nearly a half of billion dollars for stakes in common shares of Fannie Mae and Freddie Mac. Before the disclosure, an alleged illegal dividend sweep was under way. A similar lawsuit was filed by Bruce Berkowitz’s Fairholme Capital Management LLC and Perry Capital LLC in July 2013.